“The investor’s chief problem—even his worst enemy—
is likely to be himself.”
Benjamin Graham would have shaken his head in shame were he alive today. Known as the “Founding Father of Security Analysis” and Warren Buffett’s mentor, he regretfully predicted a future in which the money management industry would do little to protect investors from emotional volatility, much less direct them toward the investments that promised maximum value.
What does this dystopia mean for investors? Among other things, a retirement that’s a whole lot less enjoyable…(See disclosure here.)
How Much is the Average Investor Losing Out?
According to Dalbar’s 2014 Quantitative Analysis of Investor Behavior (QAIB), average investors in Red Bank, New Jersey and across the United States earned only about 2% annually during the past three decades.
That might seem like a solid return, given the number of ups and downs the U.S. economy has had since the 1980s. But consider this sobering fact: a 2% average annual return is worse than the return on stocks, bonds, and just about every other classifiable investment during the past thirty years!
There’s no doubt in my mind that Monmouth County investors could have done better had the money management industry not set the bar so low.
Why Are Investors Underperforming?
To put it bluntly,
the modern money management industry simply sucks.
Let me elaborate:
Most money managers set the bar too low for success. For example, they’ll probably expect you to grovel if you earn half a percent more than stocks or bonds do in a given quarter. “You’ve outperformed the market!” they’ll cry, as they carefully fold the fee money that came from your hard-earned paycheck.
It’s this kind of “any return at all” mentality that causes investors like you to lose out—often without even knowing it.
Wait…So ValueAligned® Isn’t Part of the Money Management Industry?
Nope—actually, our investing process couldn’t be any more different.
First, we know the true aim of investing, which as the late, great Sir John Templeton observed, is “maximum total real returns after tax.” AND we transform accounting into more reliable economic information that determines if a company is earning economic value added – the true driver of value.
Second, we refuse to be pigeon-holed into pre-fabricated investing styleboxes, like Value, Blend, and Growth. We own stocks of ValueAligned® companies at a discount to our estimate of intrinsic value, no matter into which style box the consultants dump them.
People who invest with modern money managers are often stuck into a specific style, even if that style is out of favor. People who invest with ValueAligned® Partners are free to fly anywhere that value takes them, within our very high standards.
The Journey Isn’t Over Yet
Stay tuned as we discuss risk, valuation, EVA, and other key components of our investing strategy in the coming weeks.
In the meantime, sign up to have financial news sent to your inbox (no carrier pigeons required!).
And if you haven’t already, schedule your complimentary, $500-value financial check-up with me. You’ll gain valuable insights into your financial future in just fifteen minutes or less.